Welcome to Zappos-Style Health Innovation

Zappos CEO Tony Hsieh’s effort to revitalize downtown Las Vegas includes last month’s launch of a new clinic, run by Iora Health and spearheaded by physician Zubin Damania. Stanford-trained, Damania also happens to rap by the name of ZDoggMD. So it’s no wonder the project has drawn attention.

But there’s another unusual aspect to this clinic. Many of the patients will be paying for care out of their own pockets, thereby sidestepping the administrative overhead and pressures caused by health insurance.

A growing number of primary care doctors see this not only as a respite from their increasingly demoralizing work circumstances, but as a chance to do what they dreamed of in medical school. Research has long shown that good primary care is the cornerstone of a cost-effective healthcare system. In this type of setting, they can do more to help their patients—and without working to exhaustion or running up huge costs.

The patients pay for their care out of their own pockets with a modest ($60-80) monthly subscription fee. Annualized, that’s actually lower than many of today’s health plan deductibles. The doctors spend as much time with the patients as needed. They are even accessible 24/7 by phone and e-mail. In addition, each patient gets a personal health coach to help them improve their health. A coach may help diabetics learn to shop for food or help people with respiratory problems learn to allergy-proof their home.

Getting rid of insurance overhead alone cut costs by as much as 40 percent. Letting the doctors take their time and concentrate on treatment and diagnosis also saves big money in the long run. Iora practices, and others like them, have reported savings in the 20 to 30 percent range so far.

One reason for that: The more time that primary care doctors spend with their patients, the fewer referrals to costly specialists they make, and fewer tests and procedures they need to order. Over the last ten years, the rate of referrals has skyrocketed as primary care doctors have been squeezed to do more in less time. In the 10-to-15-minute window insurance reimburses for, there is often little time to do more than type in a referral.

These newer types of clinics are a growing phenomenon in U.S. healthcare. They are referred to as concierge or direct primary care. The concierge practices are usually high-priced, cater to wealthy patients, and provide extra frills. But price-friendly, subscription-based primary care is now catching on. The number of such offices is growing at a rate of 25 percent per year, according to the American Academy of Private Physicians.

Some big-name investors seem to agree there’s promise in this approach. Hsieh recently invested in our company, Iora Health. Amazon’s Jeff Bezos was an early investor in one of our competitors, Qliance, as were Michael Dell and Drew Carey. We and others have attracted a growing number of venture capital investments as well.

Direct primary care is not just for the rich or middle class. In New York, we are partnering with Grameen PrimaCare to provide health care for members of Grameen America, a microfinance organization founded by Nobel Peace Laureate Muhammad Yunus. Together, we are building a clinic to open in mid-2014 that can meet the needs of even the poorest of New York’s working poor.

What’s driving this trend? Recent reports about insurance rate shock and big out-of-pocket expenses remind us that simply giving people access to health insurance doesn’t make them healthier. If they can’t afford the premiums or deductibles, they won’t get care. Company CEOs are particularly familiar with this problem. They want their employees to be healthy without breaking the bank. In a recent Gallup survey, 30 percent of adults reported skipping needed care because of costs.

Imagine spending as long as you need talking to your doctor about your health. What if your mother’s doctor called the hospital before she was admitted, stayed in close communication with them during her stay, and then saw her the day she was released to review her medications and treatment plan?


About Concierge Medicine Journal

Concierge Medicine Journal (CMJ) curates breaking concierge medicine news, and editorial opinion on a wide variety of topics relevant to the practice of Concierge Medicine.

2 Responses to “Welcome to Zappos-Style Health Innovation”

  1. I estimate managing insurance claims cost about 3% in my office. One staff member handles it using less than 20% of time. If I factor in prior approvals maybe cost goes to 5%. For some offices it’s as low a 2%. So, where does the 40% number come from?

    • Nancy,

      Thanks for input on the issue. This has long been touted as a major pain point for private physicians and a driver for the movement away from dependence on insurance reimbursements. The figure in the article is from the author, Rushika Fernandopulle a primary care physician, former director of the Harvard Interfaculty Program for Health Systems Improvement, and the co-founder and CEO of Iora Health.

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